The employment services provider
ADP, -5.78%
said profit rose 26% to $288.7 million, or 60 cents a share, from $227 million, or 47 cents a share in the same quarter a year earlier. Adjusted per-share earnings came to 63 cents, compared to 55 cents a share a year earlier.

MarketWatch spoke to ADP’s CFO Jan Siegmund to discuss the state of the U.S. labor market and where he sees potential job growth at home and overseas.

MarketWatch: ADP publishes a monthly report on private-sector jobs, and also offers a range of services to employers. Can you talk about those services and what they are telling us about the labor market?

Siegmund: Many decades ago, we were mainly a payroll company. Over the last few years, we developed the capability of a global human capital management service and we offer the entire suite of human resources products -- payroll, time and attendance solutions -- which is how you manage your workforce, talent management and tax and benefit administration. The suite puts us front and center of all the companies we work with, and that is really the underlying driver of our revenue growth story.

We publish the national ADP report and we look at our data to better understand what ‘s going on. We see wage-growth trends, which is impacted by so many factors, such as turnover rates and benefit-enrolled data. We process 24 million payrolls and 15 million people use ADP to enroll in benefits. The labor market has been healthy for a number of quarters, and we are seeing 200,000+ employees getting hired (every month). We feel the labor market has a steady improving momentum.

MarketWatch: You decided to spin off your dealer-services business back in April and as a result, you lost your coveted Triple A rating. Do you still think that was the right move?

Siegmund: It was an excellent move for us , we very much think it was the right decision. We were not surprised by the impact of this strategic decision on the credit rating. We are happy with our current credit rating. It had no impact on the business and the future. It’s a little bit the psychology, but from a business perspective it’s better for us.

We move a lot of money for our payroll clients, about $22 billion a year. This year it peaked at $49 billion. Total money moved was up to $1.4 trillion. We take a lot of money from our clients to the IRS and employees. With that, we want to be a highly-rated company, but on the other hand, it didn’t allow us a lot of room to make big acquisitions, as we felt a little constrained [trying to keep the triple A rating]. We have more flexibility now, we can make more acquisitions and make different decisions for the business without the rating hanging over us.

MarketWatch: What were the highlights of the last quarter? Where are the areas of growth?

Siegmund: We finished the year with 8% revenue growth, and 9% EPS growth – we had solid results. The overall positive news was revenue and margin expansion. That ‘s generally viewed by our investors as a good thing. We included guidance for revenue growth at 7% to 8% for fiscal 2015. We really accelerated EPS growth to 11% to 13%. We have really good momentum, and we are seeing growth in strategic platforms, such as cloud-based solutions. ADP has more than 400,000 clients in the cloud, which is a milestone for us, and 18 million users that leverage ADP’s cloud-based platforms.

We’re excited about our analytics operations. The Affordable Care Act has a lot of companies confused, it’s a big complex regulatory challenge, and ADP is in the middle of that helping clients to get through the change. In theory, small clients are not affected. If you are a company below 50 employees, you don’t have to offer benefits. But many employees will go to exchanges. It triggers a lot of discussion on compliance, what to offer, what to pay, how much will it cost and whether you should buy those integrated HR products to help.

ADP benefits from it as an opportunity by offering compliance solutions that are complicated for our clients. The Affordable Care Act is one example, payroll taxes, wage garnishments are others, and ADP benefits.

MarketWatch: What trends are you seeing in Europe and other parts of the world?

Siegmund: We offer payroll solutions in more than 100 countries. Europe as an economy is still weak; we have seen shrinkage in employment in our client base. We’ve seen some improvement in the U.K. and the Netherlands, so we are seeing some turnaround. The last quarter, we saw some visible improvement. Europe has been complicated for us to achieve growth numbers.

On the other hand, we’ve seen great growth in Latin America and solid growth in Asia-Pacific countries. This is important for us, because multi-national companies want a vendor that can be in all these countries. Brazil, prior to the World Cup, has done pretty well. The team there has been driving remarkable growth, like high double-digit growth - 30% to 40%. Chile, Peru, Argentina and Brazil are core countries that we have a good presence in, and overall that block has been doing very well. In the Asia-Pacific countries, we are strategically positioned in China, India and Singapore. That whole region, we have a good presence for our multi-national clients.

MarketWatch: The ADP jobs report this week showed 218,000 jobs created in July. We’re at pre-recession levels in terms of job creation. Do you think we’ll see even more growth as the economy starts picking up? What are the specific areas that will see growth?

Siegmund: I would describe it as at this clip – 200,000 to 230,000 jobs created a month -- is a sustainable rate for a few months. At this level, we will be reducing our unemployment rate. The number for July is about the average of the last six months, fairly consistent, and I expect that to continue.

You can easily see that the South has been a growth engine. Texas and Florida are generating a lot of jobs. The East is lagging in job creation. We have certainly seen an increase in the low-paying category. It’s really concerning for policy makers.

The trends have been fairly consistent throughout. When you look at what has been producing jobs, there’s been strength in professional services. That is a trend in this cycle. The sector that we are watching very carefully is the construction industry. When you compare this with new housing starts – that sector hasn’t recovered quickly.

MarketWatch: Are there any signs this sector is getting better?

Siegmund: What is holding it back? Could be tight credit, or the fact that baby boomers have low income. Labor-market conditions could improve in this sector. We are watching it closely as it could be an important source of jobs going forward.

Financial services has been slow. A few quarters back when rates were coming down, the mortgage sector was slow but auto-financing which has been growing, has been good. Many of the financial firms are in the Northeast, and we are not seeing a lot of improvement here.

Updating the second paragraph on total money moved by ADP to reflect the latest figures.

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